Commentary
One week ago Sunday, the Federal Reserve Board, alongside the FDIC and the U.S. Treasury, announced plans—in the wake of the failure of Silicon Valley Bank (SVB)—to provide liquidity to U.S. banks in an attempt to “bolster the capacity of the banking system to safeguard deposits and ensure the ongoing provision of money and credit to the economy.” Can we, therefore, trust that the U.S. banking system is now safe?
Following the bailout of SVB’s uninsured depositors, and with additional lines of government emergency funding now available to U.S. banks, President Biden said on Monday, March 13, that “Americans can have confidence that the banking system is safe.” The Federal Reserve Board said that “The capital and liquidity positions of the U.S. banking system are strong and the U.S. financial system is resilient.” And, even though deposit flight continued throughout the week, the eleven too-big-to-fail banks which stepped in to rescue First Republic Bank on Friday, March 17 said, “The banking system has strong credit, plenty of liquidity, strong capital, and strong profitability. Recent events did nothing to change this.”…